Debt Solution


An Individual Voluntary Arrangement, known as an IVA, freezes your debts and lets you pay them back at an affordable amount – usually over 5 years. It’s a legally binding debt solution between you and your creditors.

IVA Explained


An Individual Voluntary Arrangement (IVA) is an option which could help you take back control of your finances. They usually last for five or six years, and you make monthly payments in a repayment plan – based on what you can reasonably afford. If your payments haven’t covered your debts in full by the end of your IVA, you won’t have to pay the rest, and any remaining debts are written off.

Once you’re in an IVA your creditors can’t contact you directly or take any further action against you.

Most types of debt can be included – credit cards, personal loans, payday loans and overdrafts.

Secured debts like mortgages or secured loans, and some other debts like student loans and child support, have to be paid separately. 


Pros and Cons

  • creditors can’t chase you for the debt once you have an IVA – because they’re legally bound by it
  • you only have to repay while the IVA’s in place – usually 5 or 6 years
  • you can write off up to 85% of your debt
  • your debts are more than £8,000
  • you owe to at least 2 different creditors
  • you don’t want to deal with your creditors directly
  • you work in law, accountancy or other financial services
  • your debts are less than £8,000
  • you don’t have a lump sum available to pay, or any spare income.

Bankruptcy vs IVA – what’s the difference?

Bankruptcy involves your assets – your car, home and other valuables – being sold to pay back the companies you owe money to. It’s another form of insolvency.

Any company you owe at least £750 to can apply for you to be declared bankrupt, or you can apply for it yourself. Bankruptcy is usually only the best option for those with unsecured debts of £50,000 or more.

Bankruptcy usually lasts for one year and it will show your credit report for six years. Banks and lenders will be able to see it, and credit applications will usually be refused because of it.

An IVA is usually a better solution if you qualify for it. You must owe at least £15,000 to at least two different creditors, and 75% of them or more must agree to the IVA.

IVA will usually last for five or six years, and you will pay an agreed amount every month to your creditors. Any debts you haven’t yet cleared during this time will be wiped out at the end it.

Costs and risks of getting an IVA

Before you get one, find out about the cost and how it could affect your:

  • home
  • possessions, savings and pension
  • credit rating


IVAs have to be set up by a qualified insolvency practitioner (IP). On average, an IVA costs between £4,000 and £5,000, which depend on the size of your debt and how much of it you have to repay. You’ll usually pay the costs as part of your IVA payments, in installments.


If you own a home, you might have to remortgage it towards the end of the IVA. You can only remortgage your house if there’s equity in it, which is the amount of profit you’d make after you sell it.

If you can’t get your house remortgaged, you’ll usually be expected to pay into your IVA for an extra 12 months.

Possessions, savings and pension

If you own a car you might have to sell it to pay towards your IVA. You’ll also usually have to use any savings you have too.

If you have a personal pension which is providing you with payments, you might have to use it to pay your creditors as this counts as income.

Getting credit

In IVA will show on your credit report for 6 years from the start date. This means that any potential lender you apply to for credit may see it, and it might affect their decision. However, if you already have debts which are unmanageable, and possibly defaulted and delinquent accounts, it might already be unlikely that they’d give you credit anyway.

If you have a windfall

If you come into money – inheritance for example – you will usually have to pay all except £500 of it to your creditors.

Check what your options are

Make sure you check if there are better ways to deal with your debts. You might be able to: 

  • Bankruptcy – if you don’t have any assets, or your home is worth less than the loans secured on it
  • get a Debt Relief Order (DRO) – if you don’t own a home, your debts are under £20,000 and you have low spare income and assets
  • set up a Debt Management Plan (DMP) – if you have some spare income each month to pay back

We’ll see which debt solution is the best for your circumstances.

How to apply for an IVA

You need to use an insolvency practitioner to set up an IVA – you can’t arrange one on your own. The insolvency practitioner will charge you for doing this and will put together a proposal outlining to your lenders how you think your IVA should work. Once the IVA is approved, it is up to your insolvency practitioner to review your IVA and ensure it is working well.


Individual Voluntary Arrangement in detail:

The idea behind Individual Voluntary Arrangement legislation was to allow anyone with unaffordable debts to agree a deal with their creditors – which would allow them to make a monthly payment they could afford, towards their debts. Any unsecured debts would be written off (cancelled) at the end of it.

During an IVA your creditors can’t chase you for payments, so the calls, letters and pressure from them should stop.

If an IVA is the right solution for you, you’ll agree an affordable monthly payment based on what you can afford. This will be worked out based on your income and expenses. The monthly payment will replace all other payments you were making towards the debts included in your IVA. The information will then be transferred to one of our partner companies who will manage the IVA process for you.

Once you’ve agreed, your offer will be sent to your creditors in what’s called a ‘proposal’. The creditors will review the offer and then vote whether to accept the proposal. You need three-quarters of them (by debt value) to agree to the proposal.

Once your IVA begins, you make one monthly payment – usually for five years – and at the end your remaining debts are written off.

As an IVA is a formal contract, your creditors are also bound by it. Providing you keep up with payments, any interest is frozen and the debt is written off at the end.

An IVA is only available if you live in England, Northern Ireland or Wales. If you live in Scotland, you can apply for a Trust Deed.

  • Once you’ve decided on an IVA you’ll have an Insolvency Practitioner. (IP), who will put together a proposal for your creditors, with your help. They’ll then negotiate with your creditors for you, to agree an affordable amount to repay. Your IP will be your ‘nominee’.
  • Creditors representing at least 75% in value must agree to it, for your IVA to be approved. When it’s agreed, they can’t chase you for payments or take any further court action – as long as you keep up with payments.
  • You will only have to pay one amount each month which will cover all of your debts included, and that will include fees for setting up and managing your IVA. You won’t have to pay extra for these fees as they’re included in the agreed amount you can afford each month. The vast majority of people in an IVA pay far less than they were expected to pay beforehand.
  • They usually last for 5 years, but if you’re a homeowner you’ll be asked to release some equity towards it. If you can’t, your IVA will continue for another year.
  • An IVA is only available if you live in England, Northern Ireland or Wales. If you live in Scotland, you can apply for a Trust Deed.

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